Use of Statistics at HF
I'm a ugrad sophomore BBA-Fin, and recently reviewed the CFA® and CAIA curriculum--with emphasis on the quant area. I know all HF's are different, but how often do you find yourself using quant material from CFA® /CAIA (or any other ugrad stats class) on a day-to-day basis?
Also, I've been told that some HF's prefer no CFA® or CAIA because they want people who think differently. From what I gathered, the CFA® is heavily based on modern portfolio theory, which contradicts my investing philosophy. Is the CFA® based on MPT a correct assessment?
I took CFA 1 so far, and I would highly recommend it. I work at a large macro HF and a fair number of people have the CFA. CFA curriculum is valuable for the breadth. You can choose to adopt other investment philosophies and drill into more on your own, but you should still be knowledgeable about all the other tools out there. That's what I think the CFA is most useful for, equipping candidates with knowledge and tools. As for using quant material, my impression is that macro hedge funds are using more computing on a daily basis. Quant funds obviously need quant. Models are getting more sophisticated and require processing big data, all involving good quantitative/programming capabilities. The easy stuff is gone, more decisions are based on quantitative analysis than ever. I can't speak for L/S funds.
The basic level statistics that you use in CFA L1 is just a good thing to learn, regardless of the type of fund you join. Understanding what a normal distribution is, how to use, where can it be applied, etc. is just another useful tool, as @"philothinker" mentioned. The CFA program isn't meant to be a strict guideline on how you invest. It's really to help provide you a broad foundation of knowledge that could help you with your research. By pursuing the CFA charter and showing you've passed the exams, employers are able to better gauge how familiar you are with at least the basics of investing. It doesn't mean you're a terrible investor b/c you've had to memorize a bunch of useless crap and doesn't mean you're a good investor b/c you've passed the 1/2/3 level. Just shows dedication and that they won't have to spend a lot of time with you explaining the basics of FCF, valuation, etc.
the statistics/quant part of the CFA is as said above very much just some stuff I think every person that is working in finance should know. It really dont think its enough if you want to properly apply a statistical framework for trading/investing. You can immediately tell "CFA quants" because their "statistics" work is really just using numbers to give themselves a false sense of comfort, but they dont really dig down into what they are doing and understand why they are doing it.
If you want to really be able to use statistics as an effective tool, theres no need to become a quant, but I would pick up an undergraduate book on econometrics/time series modelling and then an introductory textbook on probabilities and distributions.
Also I have never heard HFs who actively dislike the CFA, but I will say that I work for an HF and even while interviewing most people pay it very little attention on a CV.
(Disclaimer: I personally believe the CFA is the biggest waste of time known to man)
stats for hedge fund (Originally Posted: 05/22/2013)
If I get an MM IBD FT analyst job straight out of undergrad, would the fact that I majored in stats, along with econ, help me get a job at a hedge fund? I ask this because I could graduate a year early with just one major in econ, but would need to stay all four years to do the stat major as well.
A major will not decide your fate when trying to get a job at a HF
No, of course my work experience and results will matter more, but I'm just asking if you think it's worth staying in school a year longer and spending another ~$62k to get a degree in stats.
I wouldn't stay for another year. If by taking statistics you think you might have a chance at a quant fund, you won't. As for l/s and global macro funds, your background will matter considerably more than your degree. Lots of people with Economics only, no need to spend another year and that amount of money for something which will add that little value to your resume.
SonnyZH, any advice as how to get into a L/S or global macro fund? Forex S&T for a few years, ER, or IBD?
don't waste another year, econ degree will do good since you're taking stats and econometrics. If you can get IB job on top of it, then great. It's not about your academic stats.
IBD is standard for l/s equity funds. As for macro, I've seen people with lots of different backgrounds... The transition from a research role, be it credit, equities or even pure economic, should be easier for an analyst role. I emphasize analyst, not route to PM. Lots of S&T guys from BBs end up as execution traders at funds. Rates or FX would be a good way, also seen a fair number guys working in research for the government make the transition.
Good to know, thank you!
It won't hurt but it won't be the thing that would make you get into a HF. It's more of your interviewing skills and work experience that would.
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